News & views from the American Coalition for Ethanol.

Distillers Grain

March 16, 2011

The Governors' Biofuels Coalition (GBC) wrote yesterday to Agriculture Secretary Tom Vilsack asking the agency to immediately correct its reporting procedures that overstate the amount of corn used for ethanol in the U.S.

"In recent months, global weather disruptions, rising oil prices, commodity speculation, and rising incomes that drive increased demand for grains and meat proteins have combined to once again put upward price pressure on corn and other commodities. Predictably, first-generation ethanol opponents have begun to resurrect the food vs. fuel attacks... despite the fact that numerous studies by global food organizations, the Congressional Budget Office, and other reputable experts confirmed that ethanol was not a significant factor," the letter states.

"Unfortunately, USDA's monthly corn supply and demand reports provide support for this sensationalized reporting because they identify 'corn demand for ethanol' without immediately noting this is gross demand, and not the net use of the starch portion of the corn kernel," the letter continues. "This overstates the use of corn for ethanol by as much as a factor of two or more, and fails to inform the public about what is truly happening in the food and fuel supply chain."

USDA reporting does not take into account the fact that to produce ethanol, only the starch portion of the corn kernel is used, and all the nutritional value of the corn -- the fat, fiber, and protein -- are returned to the food supply in the form of distillers grain, a high-quality livestock feed.

The current USDA reporting system does not count the 33% of the corn that comes back to the nation's supply, giving the impression to the public that ethanol uses much more corn than it actually does. A continuing error of one-third should not be acceptable. I fully agree with the Governors' Biofuels Coalition that the USDA's reporting needs to be corrected as soon as possible so the public and the media can have a more accurate picture of the real amount of corn used for ethanol, as well as ethanol plants' contribution of a valuable food product for the nation's livestock -- food for those that feed us. Food and fuel, not food versus fuel.

January 26, 2011

While I was amused that The Wall Street Journal would invoke “morality” in one of its editorials, I was stunned by the sheer number of half-truths, miscalculations, and misleading statements that could be wedged into one 600 word anti-ethanol editorial, “Amber Waves of Ethanol.”

The article primarily seeks to blame ethanol for higher food prices, and even the failure of two food companies, yet it includes no discussion about the morality of other Big Food companies who managed to thrive during the time period the others failed, by invoking the mythical “food vs. fuel” bogeyman as an excuse to raise their prices and reap record profits. While the “food vs. fuel” PR campaign was wildly successful, it was not the truth, and it still isn’t.

In fact, the opposite is true. More corn for all other uses is now available in the United States because of growing ethanol production (see chart).

Chart shows the U.S. corn crop in billions of bushels, the portion used to make ethanol, and the portion remaining for food, feed, and export.

Sources: Corn production data: U.S. Department of Agriculture / Ethanol production data: U.S. Department of Energy's Energy Information Service

The WSJ article talks of “reduced corn food supply,” which is at best ignorant of reality. The supply of corn for food in America and around the world is increasing, and in the United States that is due in part to the fact that ethanol has restored market pricing to corn – as opposed to artificially low prices with government payments designed to keep farmers growing cheap corn. Because real grain markets are more attractive, farmers are growing more corn – more food – than ever before. I am continually puzzled by those who think farmers will grow more corn if they are paid less for it. Which economics textbook did I miss that contained that theory?

The article contained many other factual errors, such as ignoring consistently higher corn yields and record-setting corn production, no recognition that ethanol only uses starch and returns all of corn’s protein, fat and fiber to the food supply in the form of the animal feed distillers grain (a 33 percent error), and no recognition of the fact that China – yes, China – is currently accusing U.S. ethanol producers of producing too much of this low-cost feed. I am led to the conclusion that if this is the quality of analysis being used to make decisions on Wall Street, we had better be prepared to bail them out again.

August 11, 2010

Dr. Wallace Tyner of Purdue University’s Department of Agricultural Economics made his second appearance at an American Coalition for Ethanol conference, his presentation this year a follow up to 2009 where he discussed his department’s new GTAP (Global Trade Analysis Project) modeling for biofuels and land use change.

Dr. Tyner first discussed the E10 Blend Wall and the impact it will have on the next generations of biofuels.

“We are at the blend wall,” Tyner said. “It is literally a wall. You cannot technically go beyond that wall.”

Because corn-based ethanol has now filled the allowable marketplace, the break-even price is now based on corn instead of being linked with gasoline as it has been in the past, he explained.

Dr. Tyner also explained that the U.S. Environmental Protection Agency made a fundamental change in the Renewable Fuels Standard (RFS) in its February 2010 final ruling. The agency changed the metric on the rule, effectively converting the RFS from a volumetric basis to an energy basis. The RFS now calls for 36 billion gallons of “ethanol equivalent.” All possible biofuels – bio-gasoline, algae, etc. – are all given an “ethanol equivalent” rating – bio-gasoline is given a 1.5 gallon rating, for example. This could actually lower the total amount of biofuel being used in the U.S. under the RFS>

Regarding the E10 Blend Wall, Tyner said that it is firmly standing in the way of cellulosic ethanol development.

“There’s no room at the inn for cellulose-based ethanol,” he said. “If we stay at E10, you can forget about cellulose-based ethanol.”

Even if EPA regulations are changed to allow E15, it might only increase the ethanol blending limit to 19 billion gallons. If corn ethanol is limited at 15 billion gallons and “other advanced” biofuels are given 4 billion gallons, as stated in the RFS, there is still no room for the growth of cellulosic ethanol.

“Even if we go to E15, there’s no room at the inn for cellulose,” Tyner said. “The implications of the blend wall are much farther than just corn ethanol alone.”

Dr. Tyner has been working on the issue of land-use change for about three years, a timeframe he says isn’t actually very long given the complexity of the issue. He has developed the Global Trade Analysis Project (GTAP) model to study how biofuels impact land use, and this year they have made updates to the model based on some new information.

Changes to the Purdue GTAP model include:

Three major biofuels have been incorporated into the model: corn ethanol, sugarcane ethanol, and biodiesel.

Cropland pasture and Conservation Reserve Program (CRP) land have been added, not accounted for in previous work.

Energy sector demand and supply have been re-estimated and calibrated to 2006.

Distillers grain has been added to the model, including its treatment, production, consumption, and trade – Tyner called this a “significant improvement”

The structure of the livestock sector has been modified to better reflect its actual functioning

A corn yield response to higher prices has been built into the model.

A change has been made to the way the model treats new land brought into production, better reflecting the actual productivity of the new land.

Dr. Tyner showed the evolution of the GTAP results, from the beginning of the model to now with these updates and improvements to the data. The modeling in January 2009 showed that .27 hectares of land were needed (globally) for every 1,000 gallons of biofuel. In August 2010, the improved modeling shows that only .13 hectares are needed – less than half of their earlier estimate.

“All of these changes in the model and improvements in the database have led us to conclude that the land-use implications are much smaller than we had estimated recently,” Tyner said.

He pointed out that the Purdue estimate is substantially less than Tim Searchinger’s much-publicized research on land-use change. Searchinger’s results found that .75 hectares of land are needed, compared to Purdue’s .13 hectares.

“In terms of land use change based on greenhouse gas emissions, the results that we’re getting today are fourteen percent of the results Tim Searchinger got in his original work,” Tyner said.

Dr. Tyner said he is a proponent of changing the way the emissions of gasoline and biofuels are compared. Currently the law in California and at the U.S. EPA compares averages, not marginals. He believes it’s more fair to compare the most recent ethanol plant built with the most recent oil extracted, which is likely oil from the Canadian tar sands. Using averages ignores the fact that ethanol is increasingly efficient while oil is increasingly damaging to the environment as it becomes harder and more costly to extract.

Dr. Tyner acknowledged that land use change is a controversial topic. Some say it’s not even possible to measure these things, but he believes that with one-third of the corn crop going to ethanol, it is important to use the best science available to try to accurately measure any land use change.

“What we’ve tried to do to the best of our ability, and to the best data available, is to estimate these,” Tyner said. “They are still highly uncertain. I do this work all the time, and I’m the first to tell you that these estimates are highly uncertain.”

Dr. Tyner said that, in terms of public policy, this GTAP modeling work can be helpful in how the EPA is implementing the Energy Independence and Security Act (EISA) and the threshold tests for greenhouse gas emissions. However, what the California Air Resources Board is doing with its Low Carbon Fuel Standard is an entirely different story, he said, because they are using the measure in the value of implementing the policy. Every tenth of a percent of carbon under the CARB rules can make a huge difference.

“We cannot measure it accurately enough to withstand almost any court case test,” Tyner said. “It depends on how you use the information, in my view, whether or not it’s something that’s useful in the debate.”

August 10, 2010

The second day of the ACE Ethanol Conference featured a panel discussion titled “Grain Changers: DDGS & the Truth Behind Food Prices.”

Jay O’Neil, Senior Agricultural Economist for the International Grains Program at Kansas State University, outlined four variables that can affect the price of food: commodity prices, fuel prices, world economic growth, and speculation. These variables, combined with weather-related problems in crop production, impact the price of food. Ethanol, however, does not have a large role in food prices.

“Ethanol had very little to do with it,” O’Neil said, referencing the world-wide run-up in commodity prices in 2008. The increase in world grain prices was due to a shortage in the wheat crop, in Australia, Europe, as well as the U.S. and Canada. Other commodities followed, and the subsequent increase in food prices was wrongly blamed on corn used for ethanol. The current drought in Russia affecting the wheat crop may bring another round of misguided “food or fuel” questioning if other commodity prices are affected.

O’Neil asked what we as Americans are more afraid of: corn prices increasing by 50 percent, or crude oil prices increasing 50 percent.

“Which of these scenarios would display the biggest threat to our economy?" he asked. "While ethanol gives America fuel independence and represents an investment in farm values, our dependence on crude oil negatively impacts our economy and our national security."

The second panelist was Bill Couser, owner of Couser Cattle Company of Nevada, Iowa. He is current president of the Iowa Renewable Fuels Association and serves on the board of Lincolnway Energy, also of Nevada.

At his family-owned cattle feedlot, Couser said he witnesses first-hand that “food versus fuel” is an absolute myth. He delivers corn to the ethanol plant harvested on his farm, and then takes the co-product distillers grain home to incorporate into the feeding ration for his cattle. Not everyone realizes that only the starch portion of the corn kernel is used to make ethanol, and all the nutrients from the corn – fat, fiber, protein etc. – is returned to the feed/food supply in the form of distillers grain.

Couser also reminded the attendees of the importance of story. “Farmers, ethanol producers, and industry supporters alike need to tell their stories to lawmakers," he said. "It's these stories, coming from your mouths, that bring credibility to ethanol's story."